Friday, April 18, 2014

Mid April Edition-Nonprofit Imperative E-Newsletter

exposing the crisis in nonprofit
fraud leadership…a crisis of pervasive and monumental waste, fraud, abuse,
mismanagement, and malfeasance throughout the charitable sector which
costs taxpayers and contributors tens of billions of dollars annually;
and,

seeking reforms that will restore
the public’s lost confidence in the sector.

The charity world
will not be destroyed by those who do evil, but by those who watch them without
doing anything.

-------------

Charities using
professional fundraisers to raise money in Michigan received only 38 cents of
every dollar raised through those campaigns last year, according to a report
from Michigan Attorney General Bill Schuette.

Skunk of the Month…

Skunk of the Month is the twice-monthly designation
made by Nonprofit Imperative, the
organization dedicated to eliminating waste, fraud, abuse and mismanagement in
nonprofits and government. The Skunk of the Month award is given to
charities and government officials who show blatant disregard for the interests
and trust of contributors and taxpayers. This month’s example is:

“They
came to do good and they did very well indeed.”

Could Embarrassment Have Killed A $17 million Fund

An
unknown person has donated $17 million since 2005 to help less
fortunate people through the Archdiocese of Detroit (MI) and the “Angel Fund”.
This person’s generosity paid for necessities like rent, medicine and overdue
utility bills.

Because of incompetence or sheer embarrassment the fund ended. The decision
is just weeks after the Angel Fund’s existence waspublicly revealed because of alleged fraud by a Detroit
priest, according to the Detroit Free Press

For over three years, a Detroit priest would fill
out false applications for grants from the Angel Fund. The fraud involved a sum
between $1,000 and $20,000, according to the charges.After catching the perpetrators the donor was
disappointed and the charity was frozen.

The donor’s decision had nothing to do with the
alleged fraud, according
to the Archdiocese. The fund’s end “cuts back seriously on
what we can do,” Sister Jolene Van Handel, a pastoral minister at Detroit’s
Nativity Catholic Church, said. However, the publicity could be one reason for
the decision that undermined the fund’s under-the-radar service.

Gambling Addiction Hurting Charities

Despite that the former
treasurer of the Depew Saints Hockey Club (NY) took and subsequently repaid her
4 year $90,000 embezzlement from her children’s league and after leaving her
position as club treasurer, she sent letters to several Depew-area businesses
requesting donations for the club from January 2010 to last April and kept the
money to support her gambling habit.

State Supreme Court
Justice told Teresa A. Fusani he went light on her sentencing because she
apparently has become rehabilitated from her gambling addiction as well as
becoming an exemplary citizen. She was sentenced to weekends in jail for four
months followed by five years’ probation and 500 hours of community service.

Gambling has had a huge impact on
charities though fraud. Did this perpetrator get off easy?

Nonprofit Imperative has dozens
examples of charity fraud caused by gambling addiction amounting to over $13
million

A Charity Check Up:

Big-Time Charity Malfeasance in Canada, Too

The Portland Hotel Society’s top managers stepped down under pressure
from government officials over the spending reports. Auditors said that the Portland
Hotel Society’s spending of nearly $26-million in annual taxpayer funds to run
housing and addiction services—including Canada’s only supervised-injection
site for drug users—was subject to lax oversight, allowing the charity’s
leaders to charge lavish travel, dining, and other costs to the organization at
a time when it faced financial problems. Managers and directors
expensed more than $69,000 over three years on restaurants, and more than
$300,000 on travel to Vienna, Paris, Istanbul, New York City, Los Angeles,
Banff and Ottawa, among other locations. Hotel rooms of up to $880 per night
were charged for trips to the United Kingdom and Austria, including flowers,
alcohol and spa services.

There were also more than $8,658 in limo fees in 2013, a trip to
Disneyland in Anaheim, a $5,832 cruise for a PHS manager, a $917 baby shower
and a $7,025 “celebration of life” for a deceased employee.

The PHS is in a “weak
financial condition” and could have trouble paying its obligations. The society
would have run a $2.07-million deficit in the last fiscal year if not for a one-time
cash infusion

A Thought or Two:

The devastation of a
charity by fraud

St. Vincent de Paul is a Catholic charity dedicated
to serving needy people. The Tacoma office is now missing a half-million
dollars.

Executive Director Charlie Thompson described
the theft as embezzlement, and an "inside" job that may have spanned
a decade.

Last summer, the charity's board discovered
some bills weren't being paid, including $200,000 to a garbage company.
Thompson said, “Items were disguised as payments to a regular vendor, one that
you would expect to be paying, but they were rerouted into personal accounts.”

Two of St. Vincent’s employees were fired and
the authorities were called.

The fallout has been layoffs. St.
Vincent had to let more than 40 percent of its staff, a total of eleven people,
go.

It had to close one of three thrift stores it
operated in January. Insurance will cover some of the losses.

Thompson said there's a chance of getting restitution
if someone is prosecuted for the theft. He said the FBI is investigating.

1.The investment account
of the Portola Valley (CA) Schools Foundation, which was defrauded of $182,500
over the fall of 2013, has been made whole by the foundation's fraud-protection
insurance.

2.The Fiesta Bowl's chief
executive, John Junker, was sentenced to eight months in prison for leading a
campaign-finance scandal that ensnared the college-football organization he
transformed from a low-key, postseason bowl game into one of the country's
biggest sporting events.The Fiesta Bowl's
former chief executive became the sixth former or current employee to be
sentenced in a scheme in which bowl employees were reimbursed for making
political contributions to those running for local, state and federal ­offices.The contributions went to high-profile politicians,
such as U.S. Sen. John McCain and Gov. Jan Brewer. Prosecutors have said there
was no indication that any of the candidates knew the contributions were
tainted. Other expenses
included throwing Junker a birthday party in Pebble Beach, Calif., and trips by
Junker and others to strip clubs.

3.A Linden (NJ) woman was sentenced to nearly six
years in federal prison for her role in the theft of $7 million worth of HIV
and cancer medications from a charity then distributed the medicines to
patients who could not afford them.

4.A Colorado woman who
allegedly convinced her young son he had cancer is accused of scamming more
than $25,000 out of her family and the local community. She allegedlytold
her 6-year-old son--
along with the community -- that he was diagnosed with cancer in September
2012. Money collected by Nguyen through school fundraisers and other donations
was used to finance a trip to Disneyland. "We don't have any reason to
believe that anyone other than her knew the truth." "The little boy
believed he had cancer. The rest of the family believed he had cancer. "When
investigators issued a search warrant of her home on Thursday, they said they
found $23,000 in cash. Police say she then admitted that her son doesn't
actually have cancer.

5.How novel; fully discharged restitution
is an anomaly and enforcement seldom happensbut… A probation revocation hearing in Georgetown could
determine whether Dayo White – the former chief financial officer of Five
Rivers Community Development Corp. – will be headed to prison for failing to
pay restitution for money she illegally took from the nonprofit agency. White and her mother, Beulah White, pleaded guilty in March
2009 to a combined six felony charges related to their theft of public money
from Five Rivers, which was supposed to help low-income people find jobs and
buy homes. Both women were given five-year suspended prison sentences and placed
on probation for a five-year period. They also were ordered to pay a combined
$65,617.17 in restitution, including interest. Beulah White, the nonprofit
agency’s executive director, repaid the $3,500 she owed and her probation
expired this week. Dayo White, however, still owes $31,146 – about half of the
$62,117.17 she was ordered to repay five years ago.The restitution
the Whites were ordered to pay amounts to a little more than 1 percent of the
$5 million Five Rivers received in state and federal grants and other funds
during its 10-year history.

6.Some of Australia’s best-known
charities have signed an open letter urging Tony Abbott to abandon plans to
scrap the national regulator. They said the launch of
the commission in 2012 was a “major step forward in creating a regulatory
environment that works for the not-for-profit sector rather than against it”. “In little over one year of operation, the ACNC has built a
strong, positive reputation by establishing the first public national register
of charities, registering more than 2,600 new charities, responding to over
70,000 requests for information from charities and the broader community,
investigating and resolving over 200 complaints against charities, and
monitoring the extent of red tape and level of public trust and confidence in
our charities,” the letter said.

7.Among 66 foundations that provided seven years of
data, assets in 2013 were still 16.6 percent below the total $223.7-billion
reported in 2007. Grant making last year among those organizations was 6.5
percent lower than in 2007 according to the Chronicle of Philanthropy survey.

8.A Los Angeles County judge signaled that
Department of Water and Power union chief Brian D'Arcy will have to turn over
records showing how two nonprofit trusts he co-directs used $40 million in
ratepayer money. The nonprofits — the Joint Training Institute and the Joint
Safety Institute — were created more than a decade ago after a grueling round
of job cuts at the city-owned utility. The institutes were charged with improving
relations between labor and management, and have received up to $4 million per
year. Judge James Chalfant in his ruling
noted that the DWP managers had provided "no supervision" and
"little control" over the nonprofits' spending and therefore shares
the blame for the controversy. "This failure is serious and has resulted
in well-warranted public scrutiny as to how $40 million of public funds was
spent," Chalfant wrote.

9.With 11 of the worst offenders [among charities soliciting funds from the
public] across the nation, Florida is taking charge. It is instituting a
public-access charitable database.

10.The Atlanta
Journal-Constitution and U.S. Senator Charles Grassley are calling for a
look into hospital compensation and whether compensation incentives are properly
designed. For
example, one hospital reportedly paid $5.3 million in salary, a bonus and cash
retirement benefits to its chief executive in 2011. His bonus of $1.2
million was attributed to his having “met every goal in his incentive plan,
including targets related to quality of care and ‘stakeholder satisfaction.’”
However, the hospital’s attorney declined to identify the specific goals
achieved. (see #11)

11.U. S. Sen. Chuck
Grassley of Iowa, in 2010, sought oversight measures for nonprofit hospitals.
“These reforms were the culmination of a review of nonprofit hospitals I began
in 2005 that revealed that the practices of many nonprofit hospitals were
virtually indistinguishable from their for-profit counterparts,” Grassley
writes in a letter to IRS Commissioner John Koskinen. He is now asking the
Commissioner to give him an update as to their implementation.

12.New York officials say they will appeal
a state judge's ruling against the $199,000 salary cap intended for executives
at the Health Department's nonprofit contractors. State Supreme Court Justice
Thomas Feinman finds the department overstepped its authority and that the
Legislature has rejected similar proposals. Gov. Andrew Cuomo more than two
years ago issued an executive order to limit administrative costs and executive
pay at state-funded service providers, noting one chief executive was drawing a
$2.2 million salary. The lawsuit was brought by the Agencies for Children's
Therapy Services, an association of 33 agencies in New York City and Long
Island providing early intervention and special education services.

13.Atlanta archbishop apologized for building a $2.2
million mansion as his residence. He bowed to criticism from local parishioners
and said he would consider selling the new home in Buckhead, Atlanta’s toniest
neighborhood. The Tudor-style mansion, stretching nearly 6,400 square feet,
includes two dining rooms and a safe room. In Newark, N.J. donations
were withheld after they learned the archdiocese was spending at least $500,000
to expand his retirement home, adding an indoor therapy pool, fireplaces, and
an office library. Last week, Pope Francis removed German bishop Franz-Peter
Tebartz-van Elst after he spent $43 million on a new residence and related
renovations.

14.A professor at Morgan State University in
Baltimore was convicted April 1 in connection with a scheme to defraud the
National Science Foundation and his students, the Baltimore Sun reported.He was accused of fraudulently obtaining $200,000 in grants from
the NSF’s Small Business Technology Transfer program in 2008 and 2009 and
applying for an additional $500,000 through the same program. Prosecutors
claimed he falsified expenditure reports and time sheets and used the funds for
personal expenses, including paying his mortgage and credit card bills and
paying his wife about $11,000, though she did no work for the NSF. He also had
oversight for another $100,000 in U.S. Department of Defense grants that were
supposed to be distributed to students working on contracts, but he falsely
told students they needed to return part of the stipends to him. Students
returned about $36,000 in grants, which he deposited in his own bank account.

15.China lawmakers are passing laws requiring charitable organizations to
publish their financial information and issue new standards for the annual
inspection of charitable organizations after the Smile Angel Foundation (SAF) had
embezzled more than 50 million yuan ($8.09 million) of its donations and that
its co-founder, actor-turned-businessman Li Yapeng, had failed to donate 1
million yuan ($161,000) of funding capital as he promised.

The economic recovery is leaving behind
many nonprofits and communities in need:
• 80 percent of respondents reported an increase in demand for services, the
6th straight year of increased demand.
• 56 percent were unable to meet demand in 2013 -- the highest reported in the
survey's history.
• Only 11 percent expect 2014 to be easier than 2013 for the people they serve.

Nonprofits are working to bring in new
money; in the next 12 months:
• 31 percent will change the main ways in which they raise and spend
money.
• 26 percent will pursue an earned income venture.
• 20 percent will seek funding other than grants and contracts, such as loans
or other investments.

Forty-one percent of nonprofits named
"achieving long-term financial stability" as a top challenge, yet:
• More than half of nonprofits (55 percent) have three months or less
cash-on-hand.
• 28 percent ended their 2013 fiscal year with a deficit.
• Only nine percent can have an open dialogue with funders about developing
reserves for operating needs, and only six percent about developing reserves
for long-term facility needs.

Respondents said that more than 70
percent of their funders requested impact or program metrics.
• 77 percent agreed that the metrics funders ask for are helpful in assessing
impact.
• Only one percent reported that funders always cover the costs of impact
measurement; 71 percent said costs were rarely or never covered.

We
flagged these few examples of nonprofit mischief

1.Tacoma-Pierce County
St. Vincent De Paul Society (WA) $500,000

2.Pitt County Board of
Education(Carolina) $38,000

3.Sullivan County Humane Society $7,200

4.Xavier University Preparatory School/ St. Katharine Drexel
Preparatory High School (LA) $85,000

15.Grove Youth Football Association and the Grove
Youth Baseball Association (OK) under investigation

16.Holy Family Catholic Parish (MI) unknown

17.Whidbey Animals’ Improvement Foundation (WA) $180,000

18.CASA (OK) $70,000

19.Santa Rosa Junior College (CA) $287,000

20.Freedom by Faith Ministries (MI) $300,000

21.Munson Medical Center (MI) $27,500

22.Chronicle
Season ofSharing
Fund (CA) $122,000

23.Pioneer House (CA) $1.3 million

24.Center Point Inc (CA) $300,000

25.Northern Michigan University student government unknown

26.Congregation Beth El (CA) $394,000

27.Evangelical Lutheran Church in America synod in
northwestern Minnesota $700,000

28.Center for Independent Living of Southwest Florida $924,000

29.Shorewood school district (WI) $310,000

30.Sheet Metal Workers International Association (MT)
more than $175,000

31.United Hebrew Cemetery (NY) $2 million

32.Mason Dixon Ruffnecks (PA) $21,000

33.Alcoa City Schools (TN) $344,000

34.Bethany College (WV) $1 million

Political/public official chicanery(just a few):

1.A former treasurer of a suburban Philadelphia fire
company has pleaded guilty to taking about $250,000 from the nonprofit-Upper
Gwynedd Township fire company-for personal expenses including trips and his
daughter's wedding.

2.Once president of the
Illinois police chiefs association, a former suburban police chief has been
indicted on multiple charges in the alleged misuse of more than $180,000 raised
for a police helicopter program he ran.

3.Seagoville
(TX) former Economic Development Corporation chief is accused of
embezzlement of over $70,000

4.A woman accused of
stealing more than $20,000 from a city employee's union was arrested on
suspicion of embezzlement and grand theft charges. She served as the treasurer
and secretary of the Murrieta General Employees Association in California

5.A
former Montezuma County (CO) undersheriff charged with using taxpayer money topay
for personal items, including firearms, has pleaded guilty to publiccorruption
charges. He was charged with 17 embezzlement counts and one count of official
misconduct involvingpurchases totaling more than
$7,400. He was accused of trying to sell some of the firearmsby
posting classified ads.

6.Former Cherryville (NC)
utility supervisor Jennifer Neal Hoyle tearfully apologized for embezzling
nearly $100,000 in taxpayers’ money before she was sentenced to 12 months and a
day in prison.

7.A Rush Springs (OK)
city clerk who admits to embezzling more than $12,000 from the city remains a
city employee.

8.A former secretary at
Bedford County Jail was sentenced to up to five years in the state correctional
institution after embezzling nearly $50,000 from an inmate commissary account.

9.Federal prosecutors say an ex-nonprofit director
has been sentenced to two years in prison for stealing nearly $500,000 from the
organization.Authorities said that 64-year-old Ruth Gayle
Cunningham, former director of Jefferson County (AL) Committee for Economic
Opportunity, was sentenced for conspiring with her daughter, Kelli E. Caulfield
to defraud the organization. Cunningham earned an annual salary of $150,000 as
director of the organization, which ran programs like Head Start for low-income
and disadvantaged families.

10.Embattled director of
the Queens Library head Thomas Galante collects a $392,000 salary, but claims
to have logged a super number of hours to collect $114,673 from consulting gig that
was awarded 15 contracts to
work on various Queens library renovations, Frank Marino of Advanced Consulting
Corp., has ties to the same Elmont School District where Galante is a business
consultant.

Galanteis the focus of an FBI probe into construction contracts as is his spending of $140,000 to renovate his executive
offices in the Queens Central Library in Jamaica (NY), including $27,000 for an
outdoor private smoking deck. Galante received a $37,000 car allowance from the
city. Galante has a five-year “evergreen” employment contract that requires the
library, a private nonprofit group largely funded with city, state and federal
money, to pay him $2 million if he is dismissed. Upon being told of these
revelations, the library’s trustees voted to restructure Galante’s contract and
to adopt more stringent financial disclosure and conflict-of-interest
requirements for Galante and his senior staff.

11.A former Cumberland (RI) Fire District Tax
Collector was arrested on for the alleged embezzlement of funds from the
Cumberland Fire District. She allegedly embezzled $83,761 in cash tax receipts
from the Cumberland Fire District from September 2008 through August 2013.She used Cumberland Fire District money to pay for
and install a new personal home computer system at her Cumberland residence at
a cost of $700.

12.Between June 2003 and the time she
left her position of director of Snow Hill EMS (NC) in June 2011, police
sayembezzled $132,000.

13.A former Plano (TX) Intermediate School District
employee pleaded guilty to federal program theft after embezzling between $2.5
million and $7 million from the school district

14.Georgetown County’s (SC) former economic
development director was arrested and charged with over $100,000 embezzlement
of public funds related to his work in that county.

15.An employee with the Kernersville (NC) Police
Department faces 314 charges of embezzlement after she allegedly stole
more than $9800 from the department’s evidence room.

16.Columbia’s (SC) economic development director is
accused of embezzling more than $100,000

17.A
former Central Falls (RI) clerk pleaded no contest before a Superior Court
judge to one count of wrongful conversion. She was sentenced to three years
with six months to serve in home confinement and the reminder suspended with
probation. According to Attorney General Peter Kilmartin, She paid full
restitution of $17,000, of which over $10,000 was paid from her pension fund. Officials
believe Tager received the money from the Municipal Court Clerk, destroyed the
records, and used the cash herself.

18.A former volunteer fire chief for Inter-Canyon (CO) Fire
Protection District, pleaded guilty to two counts of theft and one count of
embezzlement of public property. He has agreed to pay restitution in the amount
of $647,351.59, the amount of the unauthorized purchases he made using the fire
district's credit card and bank accounts between January 2010 and March 2013.

19.Money stolen from the Barre City Firefighters'
Union was earmarked for charity, but former president of the IAFF Local 881
union took nearly $5000 anyway

20.The former Jefferson County (MT) treasurer, after
an audit conducted on the 2013 fiscal year found $104,263 missing, was charged.

21.A former special assistant attorney
general for Mississippi and his sister have been indicted on felony charges of
embezzling more than $613,000 from the Mississippi Delta American Legion Post
1776. A grand jury in Bolivar County handed down the indictments March 26,
about a month after Morgan P. Shands agreed to repay the American Legion in Cleveland
$370,000. In that civil agreement, Shands didn't admit or deny violating the
Mississippi Charities Act.

Nonprofit
Imperative gathers its information principally
from public documents...some of which are directly quoted. Virtually all cited
are in some phase of criminal proceedings; some have not been charged, however
there is money missing. On rare occasions, there may be duplicates.

Gary
Snyder is the author of Silence: The Impending Threat to the Charitable
Sector (Xlibris, June, 2011) and Nonprofits: On the Brink
(iUniverse, February, 2006) and articles in numerous publications. The book can
be bought at amazon.com,barnesandnoble.com, Barnes and Noble (store)

About Me

Gary Snyder is the author, most recently, of the groundbreaking expose on the charitable sector, Silence: The Impending Threat to the Charitable Sector as well as the often-cited guide on best practices and key concepts, Nonprofits: On
the Brink.

He is the publisher of a
twice-monthly newsletter, Nonprofit Imperative that gives an update on the current status of the
charitable sector.

Snyder is often quoted and frequent contributor to the blog of the National
Committee for Responsive Philanthropy. Snyder twiceauthored the Governance Chapter of the Michigan
Nonprofit Management Manual (4th and 5th editions).

He is a speaker on ethics,
financial and governance matters of the sector. For almost a decade, Snyder is frequently
consulted by Congress and has been quoted in print, broadcast and online media
outlets.